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By XE Market Analysis September 26, 2013 2:55 am
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    XE Market Analysis: Europe - Sep 26, 2013

    The JPY saw some chop in and otherwise subdued session for the FX majors and the AUD and NZD currencies. USD-JPY and EUR-JPY initially dipped to respective one-week lows of 98.27 and 132.68 before rallying, with the yen making its usual inverse correlation to the direction of the Nikkei-225 stock index, which was boosted by news that Japan's ruling LDP will look to make a corporate tax cut amid its stimulus plans, and confirmation that PM Abe will detail new stimulus measures on Oct-1. The Australian data helped AUD-USD lift from around 0.9347-50 and rose to the 0.9375-80 area. EUR-USD remained in a narrow-range consolidation centred around 1.3520. The 1.3510 level offers initial support in what appears to be a bullish pennant consolidation pattern, forming in the wake of early to mid Sep-19 rally to 1.3568, which was the highest level seen in seven months. The ECB's recently strong communication that it remains committed to a dovish policy course, and the possible re-use of LTRO, has taken the wind of the sails of bullish argument.

    [EUR, USD]
    EUR-USD remained in a narrow-range consolidation centred around 1.3520. The 1.3510 level offers initial support in what appears to be a bullish pennant consolidation pattern, forming in the wake of early to mid Sep-19 rally to 1.3568, which was the highest level seen in seven months. The ECB's recently strong communication that it remains committed to a dovish policy course, and the possible re-use of LTRO, has taken the wind of the sails of bullish argument. We expect the pair will see a further correction toward the 1.3452 (which marks the Aug-30 peak) and 1.3430 region.

    [USD, JPY]
    USD-JPY logged a one-week low of 98.27 before finding support ahead of a three-month trend line formed by lows seen in June, August and mid-September. The pair subsequently surged to a peak of 99.11. Japanese fund names were reported among buyers in USD-JPY. Notable stop orders, including option related, were triggered through 99.00, while selling interested was reported to be clustered around the 99.20 level, which matches the current level of a trend resistance line draw in formation since early September. The 20-day moving average is presently situated at 99.25.

    [GBP, USD]
    GBP remained buoyant after getting a lift on U.K. retail sales strength on Wednesday. Cable beat Monday's 1.6072 top, though progress was hampered by a good offer at 1.6080, where option maturities rolled off. Meanwhile, EUR-GBP carved out lows under 0.8400 amid reports of very good interest to sell by model funds. On Thursday, the final U.K. Q2 GDP reading is due and expected to be confirmed at 0.7% q/q and 1.5% y/y.

    [USD, CHF]
    EUR-CHF traded either side of 1.2300 in recent sessions, with the market lacking follow-through on the downside despite Monday's close under the 200-dma. Specs are reluctant to add short positions given the persistent downside failures under this level since April. On Monday after EUR-CHF broke lower SNB's Jordan made a verbal defence of the CHF cap. Central bank rhetoric could get louder on further CHF strength and this will deter EUR-CHF sellers. The SNB have a good track record in defending EUR-CHF, though it has been helped out by the stabilisation in the Eurozone and improving fundamentals in the global economy. Nearer-term, bid interest is seen between 1.2285 and 1.2275, which were evident in recent sessions by macro names and Swiss private banks. USD-CHF gave up the 0.91 handle on reduced risk taking levels, though found some support under the figure.

    [USD, CAD]
    USD-CAD logged a nine-day peak yesterday after breaking the 1.0300 resistance level, which has now reverted to a near-term support, along with the 200-day moving average at 1.0305. Resistance is pegged at 1.0320-25, which encompasses the presently position of the 20-day moving average. The momentum of the rally in place from last week's sub-1.0200 lows has ebbed, and we would expect to see some consolidation. Canada's data calendar remains light through the end of the week, leaving the focus on U.S. indicators, including expected upward revision to Q2 GDP and jobless claims.

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